1. This is an application for determination of a question of disputed compensation. It arises following the implementation of the A96 Trunk Road (Fochabers and Mosstodloch Bypass) Compulsory Purchase Order 2005 (“the Scheme”). The respondents have acquired from the applicants plots 49 and 52A, and a servitude right for the laying down and maintenance of a water course training works and culvert on plot 50. The acquired land is now described as Areas A, B, C, D and E. In addition there are areas of retained land belonging to the respondents known as Areas F, G, H, I, J, K and L. Area L is plot 50. These areas are subject to claims for injurious affection. The valuation date is 11 July 2008. There is also a claim for disturbance. This comprises fees incurred by the applicants in a process for a Certificate of Appropriate Alternative Development (the “CAAD”) (Claim “M”); and management time incurred by Mr Gordon Christie on behalf of the applicants in pursuing the claim, agreeing to accommodation works, establishing the planning and development position in the CAAD process and certain other sundry issues (Claim “O”). There is a separate claim “N” for the cost of remedying deficiencies in an agreed package of accommodation works, and an alternative claim for diminution in land value on account of those deficiencies.
2. Detailed pleadings were provided by parties. By the time of the hearing there were two joint minutes of admission. In effect there were only three outstanding issues. It is not necessary to rehearse the agreed compensation for the settled matters. The outstanding issues were the proper values to be placed on Areas D and L, it being accepted that the residual value of L (i.e. the land subject to the servitude) to the applicants was nil; and the value to be placed on Area I in the “no scheme” world; it being agreed that its residual value in the “with scheme” world with the existing tracks amounted to £68,500. The claim in respect of the failure to carry out the accommodation works in full also remained in issue.
3. The applicants submitted that the no scheme valuation for Areas D, L and I should be £200,000 per acre on the basis that there would have been planning permission for a caravan park, and a strong market for such use. This gave rise to a claim in excess of £3m. The claim would be subject to the £68,500 residual value for Area I in the with scheme world. The accommodation works claim amounted to £185,510.83 plus VAT. The respondents’ final position was that the no scheme world valuation of areas D, I and L was within a range of £676,000 - £900,000, subject to the residual value of Area I as above agreed. The accommodation works claim was disputed in its entirety.
4. We held a hearing on 22 September 2015 and three successive days. The applicants were represented by Mr R L Martin, QC and the respondents were represented by Mr G J B Moynihan, QC. The applicants led in evidence Mr Gordon Christie of the applicants, Mr Joseph Geoghegan, MRTPI, of Grant & Geoghegan Ltd; Mr Gordon Diamond MSc, Ove Arup and Partners Scotland Ltd; Mr Donald McCreadie MLI of McCreadie Design Ltd and Mr Keith Petrie, FRICS, of FG Burnett Limited. The respondents led Mr Nigel Hackett, landscape architect of AECOM Infrastructure and Environment UK Ltd, Mr Robert Evans MRTPI, MRICS of Muir Smith Evans LLP and Mr Michael Paul FRICS, MRAC of Michael Paul Consultancy. Most witnesses produced advance witness statements, and, where appropriate, an export report. This enabled the proceedings to be conducted expeditiously. We held site visits on 8 and 9 October 2015. We visited the site in question and surrounding area, a nearby caravan park operated by Christies Parks Limited at Burnside, two further caravan parks operated by that company at Burghead and Lossiemouth Bay, and a caravan park in different ownership known as Silver Sands, also located at Lossiemouth.
Lands Clauses Consolidation (Scotland) Act 1845, Sections 48, 61 and 91
Land Compensation (Scotland) Act 1963, Sections 8, 11-13, 22-26 and Schedule 1
Land Compensation (Scotland) Act 1973, Sections 49-50
Town and Country Planning (Scotland) Act 1997, Schedule 15, paragraph 20
Davie v Edinburgh Magistrates 1953 SC 34
Jelson Ltd v Blaby District Council  1 WLR 1020
Transport for London v Spirerose Ltd (in administration)  1 WLR 1797
Strang Steel v Scottish Ministers 2015 SLT (Lands Tr) 81
5. The A96 Aberdeen to Inverness trunk road passes through Fochabers. The scheme works create a bypass. The part of the scheme at issue is at the point where the new A96 meets the A98 Fraserburgh road. The junction of the old A96 is moved about 200m east to a new roundabout. That roundabout is met from the south by a new spur from the A96. The spur and roundabout bisect the applicants’ land.
6. The bypass has been under discussion for many years. A draft compulsory purchase order was published by Scottish Ministers on 22 February 2002. A public local inquiry was held into the draft order in September and October 2003. The reporter recommended that the draft order be confirmed. It was confirmed by the 2005 Order on 1 August 2005. The respondents made a general vesting declaration under Section 195 of the Town and Country Planning (Scotland) Act 1997 on 4 June 2008 which took effect on 11 July 2008. This vested ownership of plots 49 and 52A, and servitude rights in plot 50, in the respondents in terms of the order, which are now described as Areas A, B, C, D, E and L for the purpose of these proceedings. The scheme has now been built.
7. The Christie family business is long established through seven generations. Central to it is a garden centre and associated nursery. The business demerged in 2005 whereby the garden centre devolved to Mr Gordon Christie’s brother. Mr Gordon Christie has retained various businesses including ownership of the applicants, which consists of a property and development business. He also owns Christies Parks Ltd. This business owns three caravan parks including Burnside Caravan Park. This is adjacent and to the west of the old A96, and is accordingly situated close to the new bypass. The garden centre itself now belongs to Christies (Fochabers) Ltd. This lies just outwith the acquired land and is not subject to these proceedings. The effect of the scheme is that what remains of the nursery land can no longer be efficiently used in association with the garden centre.
8. Area D comprises 1.77 acres, Area I comprises 13.45 acres and Area L comprises 0.2 acres, totalling 15.42 acres. Prior to the scheme the land was in agricultural use as part of the nursery associated with the garden centre.
9. The applicants had sought a value for the above and other parts of their land based upon potential residential use. This was on the basis that the subjects or part of them would have fallen within the settlement boundary of Fochabers. In 2012 the respondents applied for a CAAD from The Moray Council. The CAAD granted by the council was limited and only “permitted” certain Class 1 (Shops) and Class 3 (Food and Drink) uses in part of plot 49 adjacent to the existing garden centre. The applicants had objected in the process and appealed to the Scottish Ministers. At this point the applicants’ and others’ land was divided into “area one” (not to be confused with subsequently named “area I”) and “area two” which terminology is used by the reporter. Area one lies to the north of area two. Area one includes the garden centre belonging to Christies (Fochabers) Ltd together with certain pieces of adjacent land belonging to the applicants. Area two belongs to the applicants and includes Areas D, L and I as well as certain other land which is not relevant for present purposes. The applicants submitted that areas one and two were suitable for residential development, alternatively a mixed use development comprising residential development on area one with a garden centre and nurseries on area two or alternatively a mixed use development comprising residential development on area one and a caravan park on area two.
10. Both the respondents and applicants participated at the hearing before the reporter. Following the hearing he made a report dated 30 August 2013. This upheld the garden centre expansion for use classes 1, 3 and 4 for the area adjacent to the existing garden centre. He did not consider that residential development would have been appropriate on any part of the acquired land on the relevant date or at any future date. However, he considered that holiday accommodation on part of area two would have been permissible and, in particular that the CAAD should be amended to allow for such use of part of the acquired land, now named areas D and L. The relevant date for the planning assumptions for the certificate was 22 February 2002. Scottish Ministers agreed with the reporter and accordingly issued a positive certificate under Section 26(2) of the 1963 Act on 22 November 2013.
11. The reporter’s report amongst other things dealt with planning issues for a caravan site. He indicated that in the no scheme world the land was unsuitable for the expansion of the existing Burnside caravan site on account of the existence of the old A96. The report further states:-
“5.16 Policy L/IMP2 would have applied. The development would have needed to be compatible in terms of character, amenity and design, integrate sensitively into the environment and be acceptable in terms of traffic and landscape impact, accessibility, loss of productive or bio diverse land, siting, scale, colour and energy conservation. Policy S/H4 would have supported development on well-located and designed sites in the open countryside. Policy L/HC3 for new houses in the open countryside would have required regard to the impact on the landscape and the ability to achieve appropriate landscaping. The council would not normally have approved development on a prominent hillside overlooking a main road or tourist route.
5.17 Area [two] had the advantage of being surrounded on all sides by mature trees, which would have screened a holiday park development and from the village from the A96. Subject to appropriate layout and landscaping, such development could have been acceptable in terms of landscape impact and integration into the environment. An exception to policy L/ENV10 could have been justified. While the development would have been just outside the settlement boundary, it would not really have constituted expansion of Fochabers. Holiday parks are typically located in the countryside within easy reach of settlements. If the new park had been self-contained and not dependent on facilities at the existing Burnside Caravan Park, it would not in my view have been in conflict with Policy T1 in the Fochabers Settlement Statement.
5.18 Road access from the A98 could have been achieved by building a new internal access road and upgrading the existing garden centre junction on to the A98. … A permission for holiday park development on Area [two] would therefore have had a condition excluding trailer caravans. …
5.19 Policy L/T1 states that development on new sites will not be permitted within 70 metres of the present carriageway of the A96 road, outwith the settlement boundaries. In my view, in the absence of the scheme, the settlement boundary alongside area [two] would have been the west side of the A96 and Policy L/T1 would therefore have applied to a holiday park development. A strip 70 metres wide from the carriageway edge would have been excluded from development. This excluded area covers a large part of Plot 49 and the whole of Plot 52A.
5.20 While holiday park development on part of area [two] would in my view have been acceptable, the same does not apply to Area 1, or at least not to that part comprised within Plot 49. This does not benefit from tree screening and is visually prominent when seen from the village centre…”
12. The reporter proceeded in chapter 6 to recommend that the CAAD be amended to allow for holiday accommodation on the area identified in Appendix 2. Appendix 2 identifies the areas now known as Areas D and L. The reporter also included Appendix 3 which set out additional conditions for holiday accommodation. Existing conditions imposed by the council were amended so that references to ‘buildings’ included references to caravans or lodges. These conditions indicate that the ‘permission’ under the CAAD would have been for planning permission in principle, and various conditions are set out regarding site layout, landscaping and the like.
13. As stated above the areas of land in issue, namely D, L and I all lie within area two. Area two has belonged to the applicants since 2005 and prior to the vesting date. Prior to the scheme it took its access from the A98. This was a shared access with the garden centre, now belonging to Christies (Fochabers) Limited, via a servitude right of access expressed in the title. This right is for both vehicular and pedestrian traffic and is in unrestricted terms.
14. Following the scheme an alternative access had to be created for Areas D, L and I via a spur from the new junction roundabout with A98. This was because the new bypass bisected the existing access as well as area two itself.
15. We now briefly summarise the evidence:-
16. After completion of the scheme, area two was severed and was no longer suitable for its previous use for tree production for the garden centre. The felling of mature trees resulted in the area being exposed to wind from the west. The access road from the new roundabout was steep making it difficult for machinery to access the site and, as the remaining fields are small, the amount of usable land was substantially reduced.
17. Mr Christie has been involved in the caravan park business since 1980. He has expanded the Burnside Caravan Park and added services to it as it expanded. Its last upgrade was in 2003-04 when it ran out of room to expand. But for the scheme he would have sought to develop it across the old A96 and on to area two. Instead he constructed a caravan park at Lossiemouth in 2001 on 9 acres, and a caravan park at Burghead on 6 acres.
18. Since 2002 he has created over 300 serviced static pitches between his three caravan parks, and in that period has sold over 540 static units on these parks.
19. He estimates on the basis of actual costs incurred at the Lossiemouth Bay Caravan Park the average cost of developing and servicing a stance was £775. He estimates these costs would have increased by 20% by 2008 and allowing for contingencies the cost would be no more than £950. An illustrative layout showed that 169 single units and 62 double units could be placed upon areas D, L and I comprising about 15.42 acres, a total of 231 units. Assuming a cost of £950 per pitch for a single unit and £1433 for a double pitch unit, the latter requiring a concrete base, the total cost of construction would be about £250,000.
20. Static caravans are sold to owner-occupiers who continue to pay the site operator a pitch rental. In Mr Christie’s opinion the costs of developing the park would soon be recouped from the profits of caravan sales. A double unit (or lodge) would generate a profit between £40-50,000. 79% of his customers come from the north east of Scotland which was generally immune to the financial crisis in 2008.
21. Mr Christie’s business sells about 50 caravans per year including both for new pitches and renewals upon existing pitches. A single caravan might be renewed every five or ten years whereas a double would remain on a park for 20-30 years. The profit for the sale of a new caravan, made by the operator of the park, he would agree to be about £11,200. He would also make a profit of about that amount if the owner sold him a nearly new caravan, which he would sell on. The caravan sales market was doing well in 2008.
22. He estimated that the cost of development of a caravan park would be no more than 20% of the profit from the sale of caravan units in the first year. Using the respondents’ valuation method, for areas D and L alone, there could have been 32 units on the site giving a value of £727,240 or £368,650 per acre for those areas alone.
23. Mr Christie had now given up his claim for residential value. He had previously sought £25m as a starting point for discussions. Much of the earlier negotiation was carried out by Mr Christie prior to the involvement of Mr Petrie in 2013.
24. There had been discussions with representatives of the respondents since 2008 regarding accommodation works. These are works intended to mitigate the effects of the scheme upon landowners. These had initially been works intended to enable the nursery to continue operating. Amongst other things there was agreement that field tracks would be reinstated. We understood these to be perimeter tracks around fields which were removed by the scheme, and would be replaced upon the fields to the extent they did remain. There also appears to have been a verbal agreement with contractors for leaving a spare service duct or ducts under the new road including a 16 inch pipe, and also to relocate private water supply pipes. During November 2009 it became apparent that two spare ducts alongside the private water supplies would be too small and that the tarring for the farm tracks had been omitted in error. The spare ducts for the private water supply were, Mr Christie believed, too small. No spare ducts had been constructed for other services such as high voltage electricity and a water main. He produced a schedule for all the works required namely, the tarring of tracks and eight ducts, amounting to £185,510.83 excluding VAT. There had been a problem six months previously at a new garage development for the applicants where the existing water supply did not have enough pressure, and existing supplies across the bypass to the east could not be used because of the lack of ducting.
25. In the no scheme world in the unlikely event that more land was required for access for development, there would have been no difficulty in securing use of that land from Christies (Fochabers) Ltd since there was a good family relationship with the applicants.
26. In Mr Christie’s opinion the Silver Sands Caravan Park at Lossiemouth, used as a comparable in this case, was an inferior location to the projected Fochabers site. The latter is on higher ground especially to the north east with good views, and the former is subject to noise from the RAF base there.
27. Mr Geoghegan gave planning evidence. He indicated that planning permission would not have been granted for holiday lodges or static caravans on areas D, I and L in a post scheme world. This was because the landscape features which had made the development acceptable to the reporter had been changed by the scheme. This point was not contentious.
28. Turning to the no scheme world in his opinion the reporter was referring to the whole of area two in his report. The only area which he considered would not have been given planning permission was a 70 metres stand-off area from the old A96. The reporter was prepared to accept holiday lodges or static caravans on areas D and L, being the areas acquired and specifically subject to the CAAD application. However, he believed a layout on area I as well as D and L would have been acceptable in planning policy. He agreed with the reporter that the structural landscaping which existed in the no scheme world around area two, being a surround on all sides of mature trees, would have screened a holiday park development from the village and the A96.
29. Mr McCreadie gave landscaping evidence. Area two (areas D, I and L) is a relatively large undeveloped rectangular field given over to nursery related land uses. The south eastern “corner” is segregated from the main part of the field by a broken hedgerow, which corner is more elevated. Parties agreed it extends to about 3.94 acres. There is adjacent dense mature woodland associated with Whiteash Hill Wood and Fochabers Wood. The mature tree cover extended to all four boundaries of area two forming a distinct compartment and with limited opportunities for views into the land holding from elsewhere. Mr McCreadie had prepared documents and had given evidence to the CAAD proceedings. His preliminary concept masterplan for residential development and a holiday park indicated the holiday park situated on most of area two. However, an “amenity open space” area was left at the higher south east corner. This area was not part of the holiday park proposal as defined by a yellow broken line on the masterplan. Also a wooded area to the north west (extending to about 2.15 acres) was not included in the proposal, albeit both these areas were part of area two. His accompanying report at that time acknowledged that views would have been available from parts of the Fochabers settlement into the south east corner of the site and that development at that location would have been visible from the west. Any development at the site would have had to have been suitably planned to take account of this level of visibility and potential impact upon the setting. Also area two would require a looser form of development with the south eastern corner being given over to amenity open space.
30. For the purpose of the tribunal proceedings he had produced a concept master plan. This illustrated the potential for up to 169 “single” units and 62 “double units” across a site comprising area two. According to this concept masterplan, caravan units could be placed upon the entirety of the site, including the south east and north east corners, but not the 70 metre set-off area. This concept masterplan was prepared to help illustrate the development potential of the site. In his view landscape issues for the south eastern corner could have been addressed at the detailed proposal stage. The reporter’s report, however, was in his opinion apt to be interpreted as referring to the whole area two less only the 70m buffer as being likely to be granted planning permission. He also considered that it would be possible to develop caravan pitches in the north eastern wooded corner and again the reporter’s report could be taken to have assented to this. Development could be supported on the basis of an interpretation of policy L/ED13 and L/ED16 (ii) and (iii) of the Moray Development Plan 2000 which was still in force at the valuation date. In short these supported holiday chalet development within non-native woodland settings. The birch trees at the north eastern corner differed from the species mix evident across Fochabers Wood and offered scope for integration of holiday accommodation there. Mr McCreadie therefore supported holiday park development across areas D, L and I.
31. Mr McCreadie accepted that the Moray Local Plan of 2008 was less favourable to woodland developments, but it was only adopted in September 2008 which was after the valuation date.
32. Mr Diamond spoke to transportation issues. In his opinion in the no scheme world the existing garden centre access junction located on the A98 could have been used to provide access to alternative land uses such as static caravans and holiday cottages. He had not carried out a detailed transportation assessment. However, he did not think additional land would be required for an access for such use. Based upon his experience and knowledge of likely trip generation the most likely new infrastructure required would be a pedestrian island across the existing bellmouth at the junction. That bellmouth was wide and there was sufficient room to create the island from the existing road. It was possible that a right turning lane into the site might be required which in turn might require additional land. However he considered any such requirement for a new lane to be highly unlikely.
33. Mr Diamond had noted that some gradients within the site were as steep as 13% and access tracks would require to have gradients up to a maximum of 8%. In his opinion, however, access tracks through a new caravan park could follow the contours of the existing gradients so only localised works would be required to regrade the route of the tracks.
34. Mr Petrie is an experienced surveyor specialising in compulsory purchase compensation. He identified that the land was very suitable for holiday chalet/caravan park development on account of the south facing aspect of the land, the good micro climate in the immediate area, the close proximity to Fochabers and its amenities and the positioning of the site within ready travelling distance of both Aberdeen and Inverness. He identified research just prior to the vesting date of July 2008 indicating that demand for recreational property including caravan parks was high which defied the financial crisis. The applicants’ own experience in mid-2008 was also positive in that Mr Christie’s three caravan parks in Fochabers, Lossiemouth and Burghead involving 391 pitches had continued to be busy.
35. Mr Petrie considered that the land in question should be valued at a rate of £200,000 per acre. In his report he referred to three comparables. One was an undeveloped site in Perthshire extending to 1.25 acres which was on the market in late 2007. It had planning consent for 11 holiday lodges with an asking price of £275,000 or £220,000 per acre. This site had been taken off the market. He referred to a caravan park at Dunnyduff Road, Keith which he had believed sold for £341,000 in early 2008. He subsequently accepted that the price was £250,000 and, given that it subsequently became a housing site it was unclear whether it was in fact sold for caravan park use since there had been an enforcement notice in place. Mr Petrie also referred to Silver Sands caravan park in Lossiemouth which he believed sold in mid-2007 for £4m. Mr Petrie had initially been informed about these comparables by Mr Christie. Mr Petrie considered that at the valuation date in July 2008 the Aberdeen economy was still booming and there were record oil prices. This was significant because the majority of the applicants’ customers came from the Aberdeen area.
36. Mr Petrie also referred to an unsolicited approach to Mr Christie by a well-established caravan park operator in July 2007 who wished to purchase his three caravan parks and whilst no transaction was effected a purchase figure of the order of £5.5m had been suggested. Mr Christie had declined. Both he and Mr Christie had been unaware that the offeror was subsequently in March 2008 convicted of theft, apparently stealing more than £300,000.
37. Turning to Mr Paul’s evidence, it was also significant that reports into the caravan industry by Edwards & Partners suggested that caravan park values peaked in the Summer 2008 season. It was not until Autumn 2008 and the collapse of Lehman Brothers that the financial crisis was generally acknowledged to have commenced. Various criticisms were made of Mr Paul’s reports. Mr Paul’s report painted a bleak picture of the likely level of demand for Area I.
38. If one sought to value the land by means of Mr Paul’s methodology, assuming all 231 pitches were filled over seven years that would give comfort to his value of £200,000 per acre. This was based upon the initial profits made by the sale of caravans, taking account of the costs of constructing the site and the annual rentals of the sale of pitches. The calculation involved assuming an annual pitch fee of £1,800, and a profit for each new single caravan sale of about £11,000.
39. The applicant had asked Mr Petrie to put forward a further claim for £1m for losses of profit, but he had not done so.
40. Mr Hackett produced a landscape and visual assessment of the site. The assessment was intended to help understand the topography both in the with scheme and no scheme world. He used six viewpoint locations. He produced a contour overlay of the subjects. He also considered the planning policy context.
41. In conclusion Mr Hackett considered that potential significant effects of the pre-bypass scenario were relatively limited and unlikely to have a significant effect on the landscape and visual resource of the wider study area. Therefore he considered that area I may have the potential for carefully designed static caravans/holiday lodge development. However, he considered there would be no scope for development on the highest part of area I to the east of the line of trees or hedgerow which separates the south east part of the site. There would also be no scope for development in the existing woodland section on the north eastern part of area I without causing significant effects. He also thought that the sloping nature of the site is likely to reduce the potential density of any development, particularly on the higher ground. He showed a red area of 15,534 sq m superimposed on area I which in his opinion represented the developable area without significant visual and landscape effects. This excluded not only the north east and south east corners, but more generally the east section of the area since the ground rose there.
42. Mr Hackett’s evidence was challenged in cross-examination in that no specific diagram had been shown to demonstrate the visual problem in the no scheme world. The only photographs produced were taken in the with scheme world. No equivalent such as a computer generated montage or section drawings showing gradients illustrating the height of now removed trees from perspective had been provided, but could have been.
43. In Mr Hackett’s opinion it was likely that a landscape and visual assessment would have been required by the planning authority in the no scheme world. In his view there would have been significant impacts despite the mature trees, since these were mainly deciduous and development would still have been visible in the winter months. He was critical of Mr McCreadie’s illustrative drawing since this showed a rigid and formal layout of caravans which was what relevant planning policies sought to avoid. He did not consider permission would have been granted in order to allow development within the woodlands in the north east corner since these were native birch trees. This would have offended the 2000 local plan. In particular Policy L/ED13 refers to “non-native woodlands” as possibly being suitable for holiday chalets, against a presumption of refusal towards development adjacent to commercial forestry. Furthermore Policy L/ED16 in respect of tourist facilities and accommodation stated:-
“(ii) The council generally accepts the integration of holiday chalet development within woodland settings, although conservation and natural heritage implications will be taken into account for proposals which involve native woodlands and natural habitat.”
The policy further states:-
“(iii) In countryside locations, visual impact and access arrangements will be important considerations. Proposals must demonstrate what landscaping measures will be taken to assist with the integration of the site into its rural setting, in addition to providing for on-site amenity. Rigid formal layouts should be avoided, with stances/units separated to provide discreet locations/surroundings.”
Mr Hackett accordingly took the view that the layout of 231 pitches was contrary to this policy.
44. In his opinion development in the north east corner was also contrary to the Moray Local Plan (finalised version September 2006). Policy ER3 provided:
“Development proposals within woodlands will be refused where it would adversely affect the biodiversity … of the woodland.”
45. Mr Evans referred in particular to detailed local planning policies. In his opinion the most relevant policy was L/ED16 which was derived from certain housing in the countryside policies. He referred in this connection to policy L/HC3 requiring housing applications “to respect the traditional pattern of settlement in the countryside”. The policy aims to integrate development with landform and avoid causing a change in character of an area unrelated to the traditional pattern of settlement. In his opinion the landscaping evidence was critical.
46. Mr Evans was critical of Mr McCreadie’s conceptual masterplan. He referred to the layout, showing 231 caravan pitches as it were carpet bombing the site with caravan plots squeezed into every last square inch. In his opinion the north east and south east corners had not been covered by the reporter, for the simple reason that these had not been included as part of the proposed holiday park in the evidence before him.
47. In Mr Evan’s opinion, having regard to Mr Hackett’s evidence, planning policy would only support development on the lower parts of the site or hugging the southern boundary of it for a limited number and at a low density. A caravan park would involve infrastructure, parking, roadways and cars all of which would increase the potential for visual impact.
48. Mr Evans accepted that where a planning permission in principle does not limit the number of units, then a developer can put forward any number at the detailed stage. However, in practice a limitation might be inferred by an appropriate layout and density in the light of landscaping conditions.
49. Mr Evans accepted that the CAAD applied to areas D and L which were the areas acquired. As for area I, there was more than a reasonable prospect of planning permission on this part of the site. This was in the light of the fact that, assuming areas D and L would obtain planning permission in the no scheme world, as area L protruded into area I and, as it were, set a precedent for development there more generally. We understood him to accept it would be difficult to dispute the principle of planning permission being granted there.
50. Mr Paul is a surveyor specialising in the holiday park sector. He has a consultancy business offering his property surveying skills to clients looking to buy property in the industry. He has over 30 years’ experience in the UK travel and holiday park sector. He has operated caravan parks himself.
51. In Mr Paul’s opinion the Fochabers area was popular with caravan owners and holidaymakers at the valuation date in July 2008. The demand for static caravan and/or lodge pitches in the UK is notoriously difficult to gauge due to the lack of reliable data either nationally or locally. He visited a number of competing parks in Moray and found the pitch fees and prices of new static caravans to be broadly similar indicating that there was demand, since most parks were fully occupied. At the parks he visited apart from Silver Sands in Lossiemouth, there was little new caravan stock for sale which indicated that most of the parks in the area are “settled” or mature. At Silver Sands however which has over 400 pitches there was still more than 100 pitches to fill and he encountered aggressive sales techniques there. He did not think that Silver Sands was typical of the parks in the area since the other parks operated on a low key basis.
52. The economic downturn has generally been agreed to have commenced in August 2007. He considered that that does not seem to have had an immediate effect on the behaviour of those planning to buy a static caravan in 2008 in Fochabers and the north east of Scotland. However, in his opinion by July 2008 the banks would have been less likely to lend significant sums of money to businesses seeking to purchase or develop caravan parks.
53. Mr Paul visited a number of caravan parks specified in his report and provided a list of eight comparisons. He provided analysis of these. No local comparison could be found for an entirely undeveloped site, although an attempt was made to analyse the price component of undeveloped parts of existing sites which had been sold.
54. Market reports prepared by Edwards & Partners indicated that if a caravan park had been available in 2008 as an operating entity and with pitches fully occupied, it would have sold for around £15,000 per pitch, which was a figure adjusted for the Scottish market.
55. Mr Paul had been asked to value Areas D and L separately from Area I. He assumed that areas D and L rounded up to 2 acres would have had a capacity to develop 26 static caravan pitches. To construct a suitable pitch it is necessary to provide vehicular access, street lighting for the access, provision of foul drainage including septic tank, electrical connections, the construction of a concrete base of similar size to the caravan, a car park space(probably in gravel) and appropriate landscaping. He calculated a development cost of £8,750 per pitch. This was based upon the development of a site he had developed in Cornwall which cost £11,500 per pitch. In addition there would be a need to bring electricity to the site and to surface the access road to the site resulting in a total cost of say £275,000.
56. Static caravans are normally sold by the park operator once a new pitch has been established. For a 12 foot wide (i.e. single unit) caravan the operator would make a margin of 35% on the price of £32,000 resulting in a profit on each new static caravan sale of £11,200. The sale of 26 caravans would produce a profit of £291,200.
57. So the early profit and development costs tended to cancel each other out. We infer some discount was made for the fact the initial sales would take place over a period. This was consistent with the view of the leisure property market which generally accepted an equation or rule of thumb where the development costs were recovered from the profits of first sales. We took Mr Paul to be more cautious with this approach for large sites such as the present where costs would be less certain.
58. Mr Paul’s approach was to use a profits method of valuation assuming that the development costs of the business had been set off by first sales of new caravans. He considered that a fair maintainable turnover would be £35,800 for the 26 pitches. This was based upon pitch fee income of £1,800 and commission on caravan resales on the basis that single caravans are sold about every 10 years. A commission would be taken from the caravan resale of 15% of say £30,000 resulting in commissions of £4,500 per caravan, or £9,000 assuming two sales per annum. In his opinion since caravan parks in the area appeared “settled” he estimated that the number of owners wishing to leave each year would be no more than two. He accepted that Mr Christie’s method of operations was to buy and resell the caravan in his own right, rather than to charge a commission but that risked a trading loss on resale, particularly if the caravan was sold “off park” to trade.
59. Therefore, Mr Paul estimated a fair maintainable profit of about £36,000 per annum. This was based upon a total pitch fee income of £46,800 (26 x £1,800) plus two caravan resales at a profit of £4,500 each less running costs of a 26 pitch site of £20,000. He would then find a multiplier based upon the July 2008 market value for land. In his opinion the range was for a yield of 10-12% in a market which would have been faltering due to the financial crisis. Given the risks of setting up a new business and in particular a relatively poor and shared access road he chose a yield of 12% which resulted in a multiplier of 8.33. Applying this to the annual profit gave a value of £300,000 for area D and L. This methodology was accepted in the market.
60. Mr Paul proceeded to value area I assuming a planning consent for static caravan park being granted in 2008. An area of 12 acres although large was not large enough to attract national developers and so potential purchasers would be drawn from the north east of Scotland and not much further afield. A development of this size would require commitment of significant capital expenditure and at July 2008 risk capital was drying up for property development in the UK. The cost of development would probably be around £1.5m. As the access was narrow and through a garden centre the site did not carry an auspicious sense of arrival. This was significant in that the site operator would need to persuade customers to spend a large sum on a new static caravan. To assume demand for the consonant number of new caravans on a site of this size was “a massive assumption.” So he did not think he could apply the same methodology for I as he did for D and L. He estimated that the area I land would be worth £240,000 or twice the agricultural value. The agricultural value was estimated at £10,000 per acre on the basis that it was good quality with a proven particular use for the nursery, and was therefore above “normal” agricultural value. (It should be noted that the agreed figure for the residual value of the land is about half Mr Paul’s £10,000 per acre, implicitly acknowledging that nursery use is no longer available.)
61. Assuming single units, Mr Paul estimated an average density would be 13-15 caravans per acre of land. We understood this to include a certain amount of amenity space. Double units or lodges were also discussed and, of course, took more space. To keep things simple calculations were done on the basis of single units, which did not arrive at a significantly different figure. This approach was not contentious.
62. In Mr Paul’s opinion the development of a 231 unit park from start as suggested in the illustrative layout would be a huge development. No such park had been developed from scratch in Scotland before. We understood that there were many larger parks in Scotland, but that these had been developed gradually.
63. Of the comparables produced by Mr Paul, four had sold for over £1m. These were all, to a greater or lesser extent, already developed and occupied. Mr Paul had sought to break down the sales price into a value for developed and occupied, developed but vacant pitches and undeveloped pitches for each park in question. So for example, for the Silver Sands Lossiemouth comparable sold in August 2008 for £4m, Mr Paul first sought to extrapolate the lower value touring pitches, not relevant for present purposes. He then proceeded to extrapolate a value of £12,000 for a developed pitch, £10,000 for a developed but vacant pitch and £4,000 for an undeveloped pitch. He described the £4,000 value as a “starting point” for his valuation of undeveloped land, but also referred to this as a ceiling figure. He had some hesitation in using this figure more generally, because the Silver Sands site was already an up and running business and it was difficult to assume the same would be paid for an entirely undeveloped site. He had spoken to the seller who had said he was “amazed” that he had achieved the price of £4m. This was above the price which the selling agents had hoped for being in excess of £3.75m. Mr Paul believed this to be because of factors peculiar to the particular purchasers. The fact that Silver Sands had vacant pitches suggested that there was not a shortage of pitches in the area. Mr Christie had indicated that Silver Sands at Lossiemouth was an inferior location compared to the applicants’ site. This was largely on account of the noise from the RAF base there. Mr Paul did not think this would necessarily be a deterrent based upon certain experience of a site in England which was near a vintage aircraft aerodrome.
64. The Edwards market report dated January 2009 was discussed in some detail. It was notable that average pitch values recorded in 2008 increased compared to 2007. The report noted that enquiries dropped off noticeably during the summer of 2008 for the sale of parks and that prospective purchasers were being frustrated by the lack of credit. This was consistent with Mr Paul’s own experience in which there was a dramatic “silence” from buyers from about the summer of 2008 when there was a noticeable change in the ability to raise finance. Mr Paul himself had written an article for Colliers CRE being a research report of winter 2008 headed “Caravan Park and Marina Sectors Defy Credit Crunch”. He acknowledged that he himself had not seen the financial crisis coming when it did. However, the graph at the end of the report projected pitch values reducing in subsequent years.
65. It was submitted that compensation in respect of area two (areas D, I and L) should be assessed as a whole and as a combination of the valuation of interests acquired (areas D and L) and compensation for injurious affection (area I). There was no reason in the hypothetical no scheme world to distinguish between these areas.
66. It was submitted that at the valuation date it should be assumed that area two as referred to by the reporter at the CAAD inquiry had the benefit of planning permission in principle for holiday park development. “Area two” was considered by the Reporter at a time when the concept of areas D, I and L did not exist. The respondents had accepted the report and reasoning of the reporter. Section 23(5) of the 1963 Act required a formal assumption of planning permission based upon the positive CAAD for what is now D and L. We should find as a matter of undisputed fact that planning permission would have been granted for the non-CAAD land (area I) since the respondents had adopted the report making general reference to area two. Reference was made to Strang Steel v Scottish Ministers at paragraph 65.
67. Inasmuch as the respondents’ witnesses had suggested there were unacceptable impacts, it was submitted that this exercise was too late since the reporter had already decided that planning permission in principle would have been granted. The exercises carried out by Mr Hackett and Mr Evans were essentially superseded. They had not given evidence to the reporter whereas the applicants’ witnesses, Mr McCreadie and Mr Diamond had given evidence. It was submitted that the reporter had decided that landscape and visual impacts were acceptable.
68. In any event Mr Hackett’s evidence did not go so far as demonstrating there would be an unacceptable landscape and visual impact and there were weaknesses in his evidence, namely his assessment was in the with scheme world and he had not produced cross-sections to show actual inter-visibility between the site and viewpoints. There was policy acceptance for caravan parks on the edge of town.
69. The respondents had not called their roads engineer Mr Webster to challenge the evidence of Mr Diamond. Mr Diamond’s evidence was that adequate access could be provided without the need for additional land, there was no practical difficulty in achieving access and the titles indicated an unrestricted servitude in favour of the caravan park land. The respondents had led no evidence to suggest there was any sort of ransom strip.
70. It was submitted that as a matter of interpretation the reporter did not exclude the higher south east area (3.94 acres) or the wooded north east area (2.15 acres) from his reasoning and conclusions. It was a matter of design as to the details of what the development would be acceptable in these areas, and Mr Hackett had not shown that development was unacceptable in these areas. The applicants’ indicative plan showed it was possible for 231 pitches to be placed on the whole site comprising 62 double units of which 46 were in the south east area and 16 were in the north east area.
71. It was submitted that for the purpose of compensation valuation should be assessed at £200,000 per acre. Mr Christie should be accepted as having particular expertise in developing and operating caravan parks in the Fochabers area.
72. There was good evidence of demand for caravan parks at the relevant date and good evidence of pitch values of £19,000 for developed pitches in terms of the Edwards report and the Colliers CRE report for which Mr Paul was responsible.
73. There was also good market evidence referred to by Mr Christie and Mr Petrie and from Mr Paul’s tables of comparables. The Silver Sands information showed a better price achieved than advised. The evidence provided by the agents selling Silver Sands had evidence of a development site at Penrith with a guide price of £1.8m or £20,900 per pitch.
74. It was submitted that Mr Paul’s approach was flawed in that the division of valuation areas D and L from area I was unrealistic and would not have happened in the no scheme world. It was arbitrary for him to accept a value of the order of £150,000 per acre for D and L but not to apply that to area I. His evidence of slackening of demand was not credible.
75. It was submitted that there was separate support for the applicants’ valuation. Mr Paul’s figure of £300,000 for areas D and L had assumed an area of 1.6 acres but in fact, according to his own drawing, it comprised 2 acres. There were other miscalculations in his report.
76. If one applied Mr Christie’s approach that is not to sell single caravans on commission but to make a sales profit, the two sales per annum for 26 pitches would result in a profit of £22,400 (as opposed to £9,000). All else being equal this would produce a value of £200,000 per acre or over £3m for the whole site based upon 231 pitches.
77. Turning to the accommodation works the estimated cost of doing the work which the respondents had agreed to perform, but had not done, equalled £231,887.50 including VAT. The respondents had not disputed that they had agreed to carry out the works. The claim was not a contractual one, but could be regarded as a disruption claim. The respondents had led no contrary evidence on entitlement or quantification and had not led the evidence of the district valuer Mr Bowers. His report had been withdrawn.
78. The division between areas D, L and I reflects their distinct legal status for the purposes of compulsory purchase. In reality these areas represented part of one larger area. Counsel identified the issues as (a) the extent to which area I would have secured planning permission for the development of a holiday park, (b) the demand for land for such a development, and (c) the rate to be used for valuation.
79. It was accepted that in terms of Section 23(5) of the 1963 Act, areas D and L would have the benefit of the statutory assumption of planning permission subject to the conditions of the original Moray Council decision, as amended by the decision of the Scottish Ministers.
80. In terms of the relevant part of area I, there was consensus that the western boundary of the indicative site was 70 metres back from the old A96. We understand that the agreed areas of D, L and I were arrived at after any deduction of the setback land.
81. The respondents had properly interpreted all the planning and landscaping evidence, from both sides, that if the reporter’s decision were put to one side, neither the south eastern nor north eastern corners would have been granted planning permission. On the basis of Mr Hackett’s and Mr Evans’ evidence it was clear that built development would not have been permitted on the north east and south east corners and the CAAD decision was consistent with that. There was also a need to avoid “rigid formats” as required by Policy L/ED16(iii).
82. The applicants’ planning witnesses supporting planning permission to the south east and north east corners depended entirely upon an interpretation of the reporter’s decision. This was a matter of law for the tribunal and not a matter of expert evidence. It should be borne in mind that the applicants had not proposed development extending to these areas in the CAAD process and there had been no discussion of such development at the CAAD hearing. The “holiday park development” under discussion by the reporter was that which had been put before him on indicative plans, and these did not include the said corners. The applicants themselves had excluded built development on the south east corner because of adverse impact on the landscape setting of Fochabers, and this had been acknowledged by Mr McCreadie. Nor was anyone at the CAAD hearing given any indication of possible development on a wooded part of area two. It was not necessary for the reporter to endorse a wider developable area since, for his decision; all he was required to do was to consider areas D and L which were within the yellow boundaries of the “new holiday park”. It would be excessively literal to read the reporter’s conclusion as to the “holiday park development on part of area two” as intending to cover everything except the 70 m stand-off area to the west.
83. In any event, it was submitted, that the reporter’s findings on area I were not binding upon the Tribunal. Reference was made to Steel v Scottish Ministers at paragraph 62. The report could not be interpreted in an exploitative way as if it were a “grant” of planning permission. The “grant” was the specific reference to the certified area in Appendix 2, not the report in general.
84. A difficulty was there was no direct comparison evidence in point. The difficulty was compounded since the valuation date was just to the second half of 2008. Edwards had described 2008 as a “game of two halves” in relation to the financial crisis and the valuation date was on the wrong side of half time.
85. It was submitted that Mr Christie’s evidence of values particularly relating to construction costs as low as £950 for a single pitch was unreliable. He had contradicted himself by saying that only the impending bypass had held back the earlier construction of a holiday park but, various statements and contemporaneous letters showed that he had intended to pursue a residential development and to this end had made a claim for over £25m. Mr Petrie had apparently been unable to support an additional claim for £1m.
86. The issue here was what a willing purchaser would pay a willing seller in the market. Therefore peculiarities associated with the applicants, such as the practice of Mr Christie to buy back caravans rather than sell on commission were not relevant. One should look at what tended to occur across the market more generally, as spoken to by Mr Paul.
87. It was also submitted that some of Mr Petrie’s evidence – in particular the attempt to cross check his comparables approach with a future profits approach had not been put in evidence in a report. It had merely come out in cross-examination and re-examination and had not given fair notice to the respondents to enable them to test his evidence scientifically.
88. The comparables relied upon by Mr Petrie were of very limited use. The property in Perthshire had not sold. The sale price at Keith had been lower than he had thought - £250,000 and not £341,000. Neither of those supported a rate of £200,000 per acre. An undeveloped site of 15.43 acres at £200,000 per acre would produce a total value of over £3m. In contrast, Silver Sands was an operational site extending to 61 acres which sold for £4m. Nor was it clear what construction costs Mr Petrie had taken in his analysis.
89. Mr Christie had gradually built up caravan parks with profits funding phases of expansion, and this was consistent with the evidence of Mr Paul as to how caravan parks were established. It was inherently unlikely that an undeveloped area as large as 15.42 acres would be acquired for full scale development with the limit of available credit in summer 2008.
90. If on the basis of Silver Sands one applied a rate of £4,000 for undeveloped pitches, restricted to 169 caravans on the land excluding the north and south east corners, that would give a value of £676,000. A purchaser paying such a price would bear the risk that at the detailed stage the number of caravans permitted would be restricted by landscape considerations and the need to avoid a regimented design. There would be development costs of over £1.4m on Mr Paul’s figures. Thus the investment needed would be over £2m. The same methodology would produce a figure of £2.88m for 231 pitches. This would seem an unlikely bargain when one considered the risk factors.
91. On Mr Hackett’s evidence the net developable area was of the order of 4 acres to which one might add the roughly 2 acres available in D and L giving a total of six developable acres. Taking Mr Paul’s rate of £150,000 per acre (ie £300,000 for Areas D and L divided by 2) would give a valuation of £900,000. At 13 pitches per acre that would give a total of 78 caravans with construction costs at £663,000. Therefore, on Mr Paul’s rate with the fewer pitches, a purchaser would still require to find of the order of £1.56m. That total investment was accepted to be within the range of comparables in Mr Paul’s table.
92. It was suggested that a rate per acre of £150,000 was generous if applied to the whole of site I. Equally it might be over pessimistic to suggest that a valuation of only £20,000 per acre for the majority of the site. One could apply Mr Paul’s higher rate of £150,000 to a net developable area of 6 acres and this would address the more natural shape of the development and this would not be unduly pessimistic approach.
93. In conclusion it was submitted that the appropriate valuation was between about £676,000 and £900,000. Any valuation required to be netted down for the residual value of Area I, which was agreed at £68,500.
94. Turning to the accommodation works, it was submitted that the respondents had made an alternative case, namely that in the absence of those works, the value of the land was diminished by £50,000. However, there was no evidence to this effect. Accommodation works are carried out in order to mitigate the diminution in value of land but there was no evidence of a diminution simply because the accommodation works had not been carried out.
95. There was no dispute that for practical purposes areas D and L (the relevant CAAD land) and area I (the injuriously affected land) should be treated together. This is a sensible approach. The reporter was of the view that “area two” or “part of area two” would have been suitable for holiday park development. It was not disputed that he was referring to an area which went beyond the area of the strict CAAD boundary, now described as areas D and L. That being so, given the irregular and indeed haphazard shape of “L”, protruding as it does into area I, it would be impossible to conclude anything other than that the reporter intended a wider area within I to be developable.
96. The “area two” before the reporter is a wider area than the “new holiday park” shown on the indicative layouts submitted to him. This goes to the heart of the problem. The reporter had been given evidence about the development plan’s restriction on development within 70 metres of the old A96 boundary. He therefore mentions this restriction in his reasoning. In context, his reference to “part of area two” is consistent with a reading of area two subject to the 70 metre strip. So thus far, we are prepared to go along with the applicants’ interpretation of the decision, namely that planning permission in principle was available for the larger part of “area two”, and therefore area I, subject only to this restriction.
97. However, it is clear there was no case being made before the reporter to the effect that the north east and south east corners were developable for the placing of caravans or any other structure. There was no landscape evidence presented to him to this effect. On the contrary, Mr McCreadie advised against the south east corner being developed on landscape grounds, and made no case to suggest that the woodlands within the north east corner might be developed. The potential of the north east and south east corners for built development were just not a live issue. Had the applicants submitted a plan to the CAAD inquiry, similar in nature to the “concept masterplan” submitted to us showing 231 units across the entire site, it would no doubt have invited serious criticism. We venture to say that to have done so may not have been a wise tactic by the applicants. It might well have prompted the respondents to submit detailed landscape evidence at that stage attacking the proposal, as they have now done. Critically we note that the reporter is cautious in his findings at paragraph 5.17:
“Subject to appropriate layout and landscaping, such a development could have been acceptable in terms of landscape impact and integration into the environment.” (our emphasis.)
98. The reporter was therefore conscious of the various planning policies designed to protect the landscape, since he refers to them, even although he did not have to address the issue of the more sensitive “corners.” The CAAD conditions which were imposed as part of the “planning permission in principle” went on to deal with design and landscape. So these matters, inasmuch as affecting the detail of any site development and consequent valuation, in our opinion have not been resolved in the CAAD process.
99. We agree with the respondents’ evidence, and with Mr McCreadie in his report in the CAAD process, that built development or caravan pitches would not have been permitted on the south east corner at the detailed planning stage. This is higher ground where there would have been visual impact issues. At the very least it would not have been safe for any prospective purchaser to assume that planning permission would have been granted to allow pitches in that area. Equally we agree that it would have been unlikely for built development to have been permitted in the north east corner, for the reasons given by the respondents’ witnesses. The development plan policies did not support development within native woodland, and we agree with Mr Hackett that the birch trees there would be considered native woodland. In any event the emerging policies in the finalised local plan were more forceful in presuming against woodland development. So a prospective purchaser in July 2008 would not have reasonably expected “detailed” planning permission for the construction of lodges or caravan pitches within these areas. That is not to say that these areas could not have formed amenity areas within a park development and thereby serve to enhance the visitor experience. We think the latter would have been the more likely scenario.
100. So in conclusion we find that planning permission in principle for holiday park use for area I, less the 70m strip, would have been tantamount to a certainty in the no scheme world. For present purposes it is not critical whether the north east and south east corners would have been included in that permission, since at the detailed stage planning permission would probably not have been granted for the siting of buildings or caravans there. But for the purposes of valuation we find it is very likely that these areas would have been given permission for amenity use associated with the holiday park use, and that a hypothetical purchaser would have made that assumption in his offer.
101. This conclusion is reinforced by two observations at the site visit. In the first place, we think it is unlikely much of the 70m strip could have been an “active” amenity area. It was, naturally, adjacent to the busy A96T. Moreover, alongside that road the buffer includes a steep escarpment which is fenced off and takes up some of the land. Secondly, the north east corner has two telecoms masts, and the south east corner has one such mast. There was no evidence about these, but we are aware from our experience that these masts will produce a valuable rental. A telecoms mast and adjacent caravan pitch are not likely to be compatible, if only from an amenity perspective, so the hypothetical buyer would have a disincentive to develop these areas for pitches lest he should lose the telecoms rental. So we think these factors further point to the two corners being used for amenity use at most, but not caravan pitches.
102. Mr Paul described the language of the holiday park industry as being based upon “value per pitch”. Accordingly we approach valuation on this basis prior to attempting a valuation on the basis of acreage. We have pointed out that there was little dispute that we might approach the matter on the basis of single pitches. Double pitches or lodges as might be expected were more profitable, but since they used more space allowance had to be made for that. Overall, however, we understood that whether one assesses matters on the basis of single pitches only, or with a mixture of double pitches, the end result is not significantly affected.
103. Mr Hackett had suggested that detailed planning permission would be unlikely for more than 4 acres of area I, or about 6 acres in total with the addition of areas D and L. This was on the basis of landscape issues affecting the entire higher eastern area of the site, even after excluding the north east and south east corners. Having looked at the site from the most sensitive viewpoint in Fochabers for ourselves, trying to imagine the tree lines as existed in the pre-scheme world, we find ourselves unable to find a material difference in visual impact between a development of the more limited red area described by Mr Hackett and an area excluding only the two corners. So we do not think that a hypothetical purchaser would have been likely to have been presented with only the more limited option.
104. We think the hypothetical purchaser would have required to take account of the local plan policies including that proposals would have to demonstrate what landscaping measures will be taken to assist with the integration of the site into its rural setting, the provision of on-site amenity and the avoidance of rigid formal layouts with stances/units separated to provide discreet locations/surroundings. For present purposes we assume that the north east and south east corners, and to a more limited extent the 70 metre strip, could have had amenity use. Mr Christie spoke of 17-19 units per acre on his caravan parks. Mr Paul spoke of densities between 13-15 units per acre which estimate we took to include a certain amount of recreational space in close proximity to the pitches themselves. There would probably be some loss of pitches for a reception building, reception parking (two or three spaces). The design would also require a certain amount of open ground with good views in order to enhance the visitor experience, which might result in loss of further pitches. Given the sensitivities of the site, the fact that it is sloping and therefore to an extent more difficult to develop, and the need to comply with the relevant planning policies, we think that the prospective purchaser would be more likely to assume the lowest average density of approximately 13 pitches per acre. Areas D, L and I total 15.42 acres, which, less the south east corner (3.94a) and the north east corner (2.15a) results in 9.33 developable acres for pitches. That would result in an assumption of about 120 single pitches.
105. The respondents did not make a case that third party land would have been required in order to obtain adequate access, or that prospective purchasers would have been deterred through any lack of legal right to use the access for a caravan park. We do not think the evidence justifies any discount for any need for third party land.
106. This is clearly a difficult exercise. There is no good comparable transaction evidence for the value of an undeveloped caravan park in Scotland, far less such a park of a size between nine and 15 acres. Mr Petrie’s position was based upon a comparison approach, but the absence of any true comparisons means that, reluctantly, we are unable to adopt it. Mr Paul provided a more comprehensive study of comparisons, but he for the same reason did not seek to place much weight upon them. The economic background is also problematic. If the local market means existing caravan park businesses making moderate expansion, we think it fair to say that that market would not have been greatly impacted upon in the summer of 2008. North east Scotland’s economy continued to prosper in this period. But if one is dealing with a large scale project on a new site as we have here, we think the market would be restricted in the sense that prospective purchasers requiring significant borrowings from a bank would find it difficult to enter the market. That was the reality in the second part of 2008, even although certain commentators continued to express optimism in that period. Nevertheless, we do note that the Scottish market more generally did have a number of caravan park transactions in excess of £1m after the valuation date, which suggests that there were still significant market makers in operation and apparently immune to the financial crisis.
107. In these circumstances we think there is merit in attempting a valuation which relies upon a fair maintainable operating profit. This method is, however, sensitive to the establishment of appropriate development costs, and of course potential operating profits. In this case there is nothing less than a gulf between parties as to projected development costs. The difference between Mr Christie’s figure of £950 per pitch as opposed to Mr Paul’s figure of £8,750 per pitch is stark. The fact that each estimate is said to be based upon real development costs previously incurred makes our task more difficult. The matter is critical to value. In such a dispute it would have been clearly preferable if parties had had their estimates underpinned by quantity surveying evidence. However, although Mr Christie was not directly challenged in his evidence, Mr Paul explained that Mr Christie’s estimate did not carry the potential and significant costs of electricity supply or the need for concrete pitches on the sloping ground. He also noted that modern caravans weigh 5 tons and need concrete bases in order to avoid stress and, ultimately, leakage. Extensive ground works would be required, especially because of the sloping nature of the site. Landscaping would be required in terms of any planning permission. Larger developments require to provide their own sewage treatment plant as opposed to relying upon septic tanks. These matters did not appear to have been taken into account by Mr Christie, or at least not to the full extent, so we find his estimate risked being somewhat optimistic. Our observations of the sites operated by Christies Parks Ltd showed rather flatter, more benign ground conditions so it is possible that Mr Christie’s experience has been shaped by less need for groundworks and concrete bases, although a number of the latter were seen at inspection. The costs put forward by Mr Paul are akin to those which his clients interested in making a purchase would have been advised and we find this to be a better indicator of how the market would assess the costs. So we find Mr Paul’s estimate to be the more reliable for present purposes. Although we have certain concerns with his methodology, not to mention his initial arithmetic in his report, we found Mr Paul to have an impressive knowledge of the market and he had obviously gone to considerable effort to research his evidence carefully. So where there is a dispute in the figures between Mr Paul and Mr Christie, we have tended to follow Mr Paul’s figures.
108. Another sensitive assumption is the profit element on the resale of caravans. There was a significant difference between Mr Paul’s approach which was that the market could assume a 15% commission on the sale of onsite caravans, which would occur every 10 years or so, making the operator a profit of say £4,500. Mr Christie’s practice was to buy in situ caravans himself and proceed to sell them and in doing so would make a profit, he said, of about £11,200 each. This practice would, of course, open him to the risk of making a loss on resale. On reflection, we think he was mainly referring to the resale of “nearly new” caravans of only one or two years old when he was fortunate enough for this to occur. This would involve the owner being prepared to bear a significant loss. Nevertheless, our distinct impression is that this aspect of the holiday park business can be very profitable. Again, while we propose to use Mr Paul’s figures as a starting point as being representative of the market approach, we bear in mind the possibility that his figures could be an underestimate. As we discuss, we will need to balance this possibility with the fact that Mr Christie’s existing parks, with apparently highly profitable resales, offer more facilities than the proposed park.
109. It appears somewhat arbitrary that Mr Paul should have valued the first 26 pitches/2 acres at £150,000 per acre, but the remaining land at £20,000 per acre. Nevertheless, we think to apply the former rate across the board based as it is upon developing and occupying the entire site in short compass, would be a bold approach for the reasons he gave. The valuation would assume a high level of demand for new caravans as well as the ability to finance a large development. Both these assumptions, we think, require very significant qualification in light of the evidence. We are conscious that the Silver Sands site was making considerable efforts to sell new caravans, but still had a large number of vacant pitches. We acknowledge that this may be an inferior site on account of its proximity to the RAF base. Nevertheless, we think it is indicative of a risk of finite demand for new caravans. This would be a concern for any developer entering the market on a new site, who would wish to recover his construction costs by the early sale of caravans in the future. On the other hand we note that on the evidence Mr Christie was able to develop about 25 new pitches in the area annually (i.e. 300 ÷ 12 years), each of which we infer would have formed the basis of a new caravan sale. We give weight to this factor. We think therefore that Mr Paul’s approach to value land for the first 26 pitches on a full earnings basis, but to value the remainder of the land on a different basis, is not as arbitrary as it might first seem. However we are not attracted to his approach that the valuation for the remainder of the site is based upon an enhanced agricultural figure. We agree with Mr Petrie that this approach seems unduly pessimistic. It does not adequately reflect the fact that there were still high value caravan park sales – albeit of developed parks - in Scotland at or after the valuation date.
110. We find that the site is not so attractive as to attract premium prices. It is not in proximity to a beach such as the Lossiemouth caravan parks. There was no evidence that caravanners would have adjacent access to Forestry Commission walks such as those available at the Burghead site, or to a swimming pool such as available at Burnside. The views outwith the site would be largely screened by trees in the summer. We think Mr Paul was right to raise concern about the shared access as diminishing a sense of arrival. The potential for sale and resale of caravans will be affected by the quality of the setting of the caravan park. Partly because of that, as well as the market conditions referred to, we are inclined to take Mr Paul’s more conservative estimate of continuing income in the form of commissions arising from caravan sales.
111. We are in broad agreement with Mr Paul’s approach to value for the first 26 pitches/2 acres. We propose to follow it subject to minor variation. The problem is how to value the remainder of the developable 9.33 acres. We think a potential purchaser would have been prepared to pay more than enhanced agricultural value for a site which allowed for continual expansion over a period. The evidence, including the comparison evidence such as it is, demonstrates at least in general terms that there was a market for acquiring a larger scale operation, albeit essentially in the form of existing sites with further development potential. The caravan industry is profitable. For the reasons discussed, the comparison evidence does not allow us to settle upon a reliable figure. We have decided therefore to adapt Mr Paul’s first stage methodology ourselves to provide for what we would consider a more satisfactory overall approach to this difficult issue. By this approach we assume the hypothetical purchaser would intend to develop the site in tranches over a period in the future, but discount his price for deferred income and risk. The assumptions in the calculation involve a cautious, but we believe a not over cautious, view of risk. The type of staged development envisaged is consistent with the approach of owner operators who, we were told, tend to expand incrementally.
112. We have decided upon a two-step approach. Step 1 values the first 2 acres/26 pitches. We have taken Mr Paul’s assumption that the generally accepted equation in the industry is that development costs tend to be covered by first sales to new pitches. We have taken his income figure subject to one variation. We think that the income from commissions should be deferred for a period because resales (£9,000 pa), on average, are more likely to occur after a period of time from first purchase. We have deferred this income for 4 years being the earliest point at which resales could reasonably be expected by the prudent hypothetical purchaser. The pitch fee income figure of £1,800 per pitch was not challenged. While we are prepared to use it with some caution, our observation would be that the extrapolated £1,100 per pitch at Silver Sands as a comparison is considerably less, raising a question whether the £1,800 figure is on the high side. We capitalise the income at 12% being Mr Paul’s discount rate. We assess the capital value per undeveloped, but developable pitch at £10,400 as shown in the calculation below.
113. For step 2 we assume that the remaining 94 pitches will be developed in stages, and let at a rate of 13 per annum, which would take a further period of just over seven years. On the basis of the calculation above, slightly adjusted from Mr Paul’s, a capital value of £10,400 per pitch is created at the rate of 13 per year. As these would be “new” pitches in the area, involving an important assumption of new market capacity, we think a hypothetical purchaser would take a fairly cautious approach to development. We bear in mind the undeveloped and unoccupied pitches at Silver Sands, albeit a less attractive location. Our broad assessment of 13 per annum involves a rate of sale and development of about one half the rate of Mr Christie’s development rate (about 25 per annum) hitherto. Whilst we accept Mr Christie’s evidence on this point there could be no guarantee that such a rate could be maintained until this large site was fully occupied. We think the hypothetical purchaser would take a substantially more conservative approach. It would also be fair to point out that to take higher rate of sales would probably require higher marketing and site costs.
114. The total of 94 x £10,400 would amount to £977,600 for the remaining land. We do not believe a buyer would pay this amount. He would require to discount to present value, since the £10,400 pitch value will only be created in the future. We discount to present value at 14% rather than the 12% used in step 1. This is because the remaining area is significantly larger than the initial 2 acres, and is indeed a substantial development site. The hypothetical purchaser would perceive a higher degree of risk both in terms of timescale and quantum of the proposal so we think a rather higher discount rate should be selected. The figure assumes a deferral of two years for the first 2 acres to be developed and sold. The Years’ Purchase and Present Value factors are derived from Parry’s Valuation Tables.
|Value of First 2 acre site.|
|Income||26 pitches @ £1,800pa ea.||£46,800|
|(deduct management costs)||(£20,000)|
|Net pitch income||£26,800pa|
|Capitalised at 12%||8.33 YP||£223,333|
|Income from sales commission||£9,000|
|(2 sales pa at £ 4,500 comm. each)|
|Capitalised at 12%, income deferred 4 years till first re sales,||5.29 YP||£47,610|
|Total gross value per 2 acres.||£270,943|
|say £270,000 (£10,400 approx per pitch)|
|The capital value created by developing and letting pitches every year assumed £135,200 (13 @ £10,400), thus-|
|PV of £135,200 pa for 7.25 yrs @ 14% (deferred 2 years)|
|£135,200 x 4.375 YP x 0.769 PV||£454,863|
|TOTAL £724,863 say £725,000|
115. As we have indicated this approach assumes first sales and development costs cancel each other out. In fact, on Mr Paul’s figures there was a small excess between costs for the first 26 pitches (£275,000) and the initial profits on sales (£291,200). The costs included what we understood were one off costs of £47,000 for the whole development namely supply of an electricity transformer to site (£27,500) and surfacing the access road to the site (£20,000). On the other hand, Mr Paul considered that for a larger development individual septic tanks would not be permitted and it would be necessary to install a sewage treatment system providing for outfall of a certain quality unless a mains connection was available. We understood no such connection was available. We took him to mean that construction of a sewage treatment system would be significantly more expensive, but the costs were not estimated. We also inferred from the planning evidence that general landscaping would likely be required, probably in association with turning the north east and south east corners into amenity areas. So there is a risk that Mr Paul’s “per pitch” development cost figures were, if anything, on the conservative side for a larger development. Therefore, going forward, we think it is almost impossible to give an accurate figure for costs and initial profits for each tranche. We have therefore followed Mr Paul’s view of the generally accepted equation that the development costs are covered by the first sales, and that a cautious approach would be required for larger sites. We think that the prudent purchaser would be prepared to assume they would cancel each other out, but no more than that given that the site would not attract premium prices.
116. There is very little evidence to provide a reliable cross check. Mr Paul had extrapolated from the Silver Sands comparator, with much caution, a “ceiling” of £4,000 per undeveloped pitch. This was based upon a large number (121) of undeveloped pitches. That is not too far from our step 2 valuation which would value each future pitch at about £4,800 (£454,863 ÷ 94), given that Silver Sands was in certain respects an inferior location.
117. We therefore value the sum of land at D, L and I at £725,000 in the no scheme world. As I is an injurious affection claim it is necessary to deduct the residual value of I agreed at £68,500. L (subject to the water course servitude and culvert) has no residual value. Therefore the sum to be awarded for these claims totals £656,500.
118. We have some sympathy with the applicants in that it is undisputed that “agreed” accommodation works were not carried out by the respondents. We think senior counsel for the applicants was correct to categorise this as part of a disturbance claim. However, in our opinion it is necessary for the applicants to establish either that the work requires to be carried out in order reasonably to mitigate loss, or that land has been devalued further by the absence of the works. There is no evidence which would allow us to quantify diminution in value. That leaves the question whether the works as quantified are still required reasonably to mitigate loss so that the need for the works can properly form part of a disturbance claim.
119. The applicants did not give evidence to the effect that they intended to do the works themselves as a practical necessity. We are unable to infer from the evidence that the works are reasonably required to mitigate losses. We do not know what those losses might be. Reference was made to problems by not having the same access to a previously existing private water supply, but we have no evidence of the scale of any increased costs or lost opportunities elsewhere which would justify the cost of new ducting work. Turning to the tracks, we do not agree that what would be “normal” agricultural fields (if they were to be restored as such) are in effect devalued because the tracks, which have some base material, are not tarmacked as they were previously. Those tarmac tracks were for the purpose of the previous nursery business, which we infer would have had relatively greater vehicular use, but which is no longer in prospect. The part of the site in question has potential only for agriculture and we heard no evidence that tarmac needed to be laid for this purpose. So we do not think there is a disturbance element capable of quantification.
120. We therefore find that for compensation purposes the value of the interest acquired in area D, and the injurious affection to areas L and I total the sum of £656 500. Our short Order finds accordingly. We propose to make no further order at this stage in the hope that parties can agree to the disposal of the other parts of the claim including interest. For avoidance of doubt this decision is a determination in terms of section 8 of the 1963 Act and the Tribunal rules.
121. We reserve all questions of expenses.
Certified a true copy of the statement of reasons for the decision of the Lands Tribunal for Scotland intimated to parties on 16 December 2015
Neil M Tainsh – Clerk to the Tribunal